Sessional_Paper_1929 — Page 197

SIR,

189

Annexe C.

1 Des Voeux Road Central,

HONG KONG 6th February, 1929.

Re Proposed Amendment to the Stamp Ordinance in Reference to the Stamp

Duty Payable in. Respect of Share Transactions.

Since my return to the Colony I have perused the C.S.O. files in connection with this matter and the petition in opposition to the proposed Ordinance. I have discussed the proposals with the Committee of the Hong Kong General Chamber of Commerce and with a number of brokers and others.

I have had a joint conference with the Honourable Colonial Treasurer and the Hon- ourable Sir Henry Pollock, and at such conference it was arranged that I should draw up a Memorandum on the subject.

I have three objects in mind:-

(a) That the Government should receive its fair measure of stamp duty on each share transaction, by which I mean, each purchase of shares in the Colony. (b) That the Government should receive its fair measure of death duties, and (c) That it is for the general benefit of the Colony that the speculator be not preferred to the genuine investor, in other words, purchases for a rise in the market, most of which are forward contracts, shall bear the same taxa- tion as an investment transaction.

I do not think there should be new or increased taxation-in fact I am suggesting a remission of the contract stamp duty.

My view is that each and every purchase of shares should pay to the Government stamp duty on the same basis whereas at the present time in practice the genuine inves- tor in fact pays a great deal more, because he is buying the shares with the object of holding them, he registers them in his name, so as to obtain all the benefits of a share- holder and clear his purchase from any lien which might be exercised by the company against the registered holder. The speculator holds the shares with a blank transfer attached and pays only the contract stamp duty, which is far lower than the amount paid by the genuine investor, in stamp transfer duty.

Up till 1921 only transfer stamp duty was paid, but in that year all stamp duties were reviewed and raised in many cases based on the recommendations of a commission held for that purpose. It was proposed to enforce the immediate registration of all trans- fers of shares and do away with blank transfers so that the Government should receive transfer stamp duty on all transactions, but in negotiation with the Stock Exchange it was arranged that instead of enforcing the immediate registration of transfers, a share contract stamp varying from $1 to $10 should be placed on each share contract.

The stamp transfer duty payable at the present time is 20 cents for every $100 or part thereof.

The principal objections raised to the proposed amending Ordinance are:-

(a) That it detrimentally affects the negotiability of shares by abolishing the

system of blank transfers.

(b) That it would force the bulk of the shares in the Colony into the names of

nominees of the banks.